On August 14, 2012, the Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission ("CFTC") issued responses to frequently asked questions ("FAQs") to clarify rule changes concerning registration and exemptions for commodity pool operators ("CPOs") and commodity trading advisors ("CTAs") under Part 4 of the CFTC's regulations. FAQs.
We are highlighting the CFTC's FAQs because they address a variety of issues and concerns raised to date by market participants relating to compliance obligations for CPOs and CTAs. Notable points made by the CFTC staff in the FAQs include, but are not limited to, the following:
- A general partner, managing member, or board of directors of a commodity pool that properly delegates its rights and responsibilities to a registered CPO may avoid registration as a CPO, if certain conditions are met;
- Wholly-owned subsidiaries of commodity pools trading in derivatives are themselves commodity pools;
- The notional value for uncleared swaps is the amount reported by the reporting counterparty as the notional amount of the swap under Part 45 of the CFTC's regulations;
- Until the CFTC adopts revised guidance, CPOs of funds-of-funds relying on the de minimis exemptions under Rule 4.13(a)(3) or Rule 4.5 may continue to rely on the guidance set forth in former Appendix A to Part 4 of the CFTC's regulations;
- Private funds currently relying on the Rule 4.13(a)(4) exemption that expect to register and rely on the Rule 4.7 exemption will not be required to reaffirm that all existing fund investors are "qualified eligible persons;" and
- CFTC staff does not anticipate releasing additional guidance concerning Forms CPO-PQR and CTA-PR this year; as a result, CFTC staff "believes that entities are entitled to make reasonable assumptions consistent with a good faith effort in executing their compliance obligations" in the filings until further guidance is released.